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August 2011

Harmful Credit Union Provision Becomes Law

This Legislative budget session did not end well for cooperative businesses and consumers. Governor Scott Walker failed to veto a potentially very harmful budget provision on credit unions that creates a new and expedited process for converting credit unions to banks. It should be acknowledged that Governor Walker did not include this provision in the budget he originally proposed to the Legislature, despite apparent efforts by the state’s large banks to get the measure included. When that route failed, the banks turned to State Representative Daniel LeMahieu (R–Cascade). Editor Bruce Murphy of Milwaukee Magazine wrote in a June 21 article on the provision: “The four-term lawmaker [Representative LeMahieu] was asked to be the water boy for a legislative change he barely understands.”

Last month’s Wisconsin Energy Cooperative News detailed why the state’s cooperative business community is alarmed by this provision and I will recap a few of the reasons here.

First, credit unions are member-owned cooperative businesses, so a bad provision impacting them potentially impacts all cooperative businesses in our state.

Second, the new language was added to the state budget on a 12–4 vote of the Joint Finance Committee with less than 24 hours notice that it was even being considered, and no copy of the proposal was made available until two days after its language was adopted. This provision was never included in an introduced bill and never received a public hearing. Perhaps I am naïve, but I would have thought even the state’s large banks would have objected to this lack of legislative transparency and fair play.

Third, legislators remarked to my staff and me that banking representatives told them credit unions supported the provision. However, the Wisconsin Credit Union League and many of its members strongly opposed the provision and not one credit union was ever publicly identified as supporting the provision. This gives hope that the new law will never be used and only represents a short-term political victory for the state’s large banks, a community that just got much smaller with the formal acquisition of M&I by a very large foreign bank.

This controversy exposed a split within the Republican Caucus in the State Legislature. Prior to Governor Walker’s decision against vetoing the provision, 15 Republican legislators sent a letter to him asking for a veto. Cooperative members should be encouraged that the following 15 legislators, primarily from rural Wisconsin, courageously asked for the veto against the wishes of their Republican leadership: Representative and letter author John Murtha (Baldwin); Senators Robert Cowles (Green Bay), Dale Schultz (Richland Center), Van Wanggaard (Racine); and Representatives Ed Brooks (Reedsburg), Joe Knilans (Janesville), Scott Krug (Wisconsin Rapids), Steve Nass (Whitewater), Lee Nerison (Westby), Al Ott (Forest Junction), Jerry Petrowski (Marathon), Don Pridemore (Hartford), Keith Ripp (Lodi), Gary Tauchen (Bonduel), and Mary Williams (Medford).

Yet other Republicans told us they worked against the provision behind the scenes. No Democrats were included on the letter since they would not have carried much weight with Governor Walker, although I will note that many Assembly and Senate Democrats expressed their strong support for credit unions. The four Democrats who serve on the Joint Finance Committee who voted against the provision are Senators Lena Taylor (Milwaukee) and Robert Jauch (Poplar) and Representatives Jennifer Shilling (LaCrosse) and Tamara Grigsby (Milwaukee).


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